Colin Blaydon and Fred Wainwright, professors, Center for Private Equity and Entrepreneurship at Tuck School of Business, Dartmouth University, draw from proceedings of the National Venture Capital Association Corporate Venture Summit in November 2010 and written up by the Center for Private Equity and Entrepreneurship at Tuck School of Business, Dartmouth University.
The rationale for spin-outs is threefold: strategic, financial and technological.
Strategically, a spin-out allows the parent corporation to become a customer or partner of the unit. It also opens up new channels to global markets for technology in which corporate business units cannot or will not invest.
For the parent corporation, spinning out a unit preserves the option to reacquire or reinvest later when the risk is diminished.
Financially, spin-outs allow for access to high-risk capital funding…
